Microsoft Won't Charge More for Multicore Licenses

As servers with dual-core processors come closer to hitting the market, Microsoft (Nasdaq: MSFT) announced today it will not base its per-processor software licensing charges on the number of cores in a chip, sticking to the traditional price per processor, regardless of its number of cores.

The issue has risen in significance as software vendors with per-processor licensing -- having struggled somewhat to address other processor technologies such as hyperthreading -- adjust to technologies that cut down on the number of machines needed.

Analysts have warned that software makers might license their server products at double the price for double the number of cores, but many have also indicated that software companies have little to gain from multicore price increases.

More Power, Same License

Although some vendors have hinted they may charge more for software licensing on multicore processors, most have moved closer to Microsoft's announced stance, which seeks to maintain the status quo without charging more for multicores.

"Microsoft software that is currently licensed on a per-processor model will continue to be licensed per processor, not per core, for hardware that contains dual-core and multicore processors," the company said in a statement.

Microsoft said its multicore licensing decision is aimed at driving higher volume and better value with the advent of dual-core and multicore server processors from both AMD (NYSE: AMD) and Intel (Nasdaq: INTC), which are expected in hardware beginning next year.

Microsoft said regardless of whether they are running on a four-processor server with single cores or on a server with four dual-core chips, products such as SQL Server and BizTalk Server would require four licenses based on per-processor pricing.

"Our customers want to understand software costs as they evaluate the return on investment of new technologies, such as multicore processors," said Microsoft vice president of licensing and pricing Brent Callinicos in a statement.

Problems With Progress

Despite the significant boost in performance that comes from doubling the cores on a processor -- allowing more simultaneous functions from the same number of machines -- dual-core and multicore processors also create software licensing issues.

According to Gartner (NYSE: IT) analyst Martin Reynolds, the fear has been that software vendors would double their prices for dual-core processor coverage, creating big cost jumps for enterprise customers. Gartner recommends customers attempt to negotiate software licenses that count a single-chip device as one processor, regardless of how many cores it carries.

While some vendors, including IBM (NYSE: IBM) and Oracle (Nasdaq: ORCL), have signaled they might charge more in licensing for dual-core and multicore products, Microsoft confirmed what many analysts had predicted -- that the addition of processor cores was by no means an opportunity for software vendors.

Hardware Ahead

Yankee Group senior analyst Laura DiDio told TechNewsWorld that Microsoft was making a proactive move to address the issue, but was also signaling to its customers that it is not a hardware vendor and could not lower software prices along with the dip in hardware costs that comes with the efficiency of multicore chips.

DiDio said that while customers might benefit from more efficient processors and interaction with the software, they will pay the same rate they've been paying to license Microsoft products with the new hardware.

"This multicore technology really illustrates the dichotomy between the rapid advancement of hardware capability, which is in turn making issues with how software companies license the technology," DiDio said.

Wait and See

Referring to the complexity of per-processor licensing, even without the addition of dual-core technology, DiDio said software makers do not want to be seen as raising their prices, for fear of losing customers.

Nevertheless, software vendors have proceeded cautiously on the core question, with rivals IBM, Oracle, Sun, Microsoft and others waiting to see how the others approach the issue, partly to learn what works and partly to have the opportunity to counter, according to DiDio.

She said IBM is in a different situation since it makes money not only from software and services but also from hardware.